Observations by an academic researcher on the use of “open”-ness as a competitive strategy, with a particular interest in coping with the commoditization of information goods and technologies in an Internet-enabled world.

Friday, May 6, 2011

As part of meetings today at San Jose State about shaping a new Silicon Valley-specific business program, one of the key questions that came up was “what is Silicon Valley?”

At the SJSU College of Business, we have been quite successful in preparing firms for careers with Silicon Valley companies, supplying more graduates to these companies than any other university. To a large degree, this has been a serendipitous benefit of our location — and the sort of ambitious, first-generation college students we attract.

As part of our brand-building and shift to fee-supported (rather than taxpayer-supported) programs, the college is working to increase the Valley differentiation of our programs. Much like Evian, Perrier, Arrowhead or Calistoga, our challenge is to bottle what’s special about our backyard and export it to the rest of the world.

In today’s discussion, my friend and colleague Dr. Michael Merz, described Silicon Valley as a brand used to market the region to the rest of the world. This is not surprising, given that he’s in the marketing department — and given that he came to Silicon Valley three years ago from Germany (via Honolulu).

Although I completely agree with Michael’s list — exactly the list of why I came to San Jose State almost nine years ago — my immediate reaction was that he left something out: dynamism.

4. Dynamism

Silicon Valley is not just about technology entrepreneurship. It’s also about the Schumpeterian “gales of creative destruction” bringing both corporate death and new life.

Yes, the Valley headlines and headcount and revenues and tax dollars are disproportionately tied to the proven Fortune 500 tech companies such as HP and Intel and Apple and eBay. But other places in the world (Boston, Seattle, Seoul, Tokyo) also have successful tech companies.

What makes us unique is how common to find a middle-aged professional who’s worked for four or five companies, with at least one company that’s no longer around. Around here, working for a dead company is not a mark of failure but a badge of honor.

This was brought home last month at the COB alumni banquet last month, where one of our alums talked about how he took his business degree and stumbled into a 25-year career running tech companies. Dan Doles has been CEO or founder of three software companies so far, in between working at Ernst & Young and running Oracle’s sales operations.

He’s hardly alone: in my nearly nine years, I’ve met many others who fit the same profile (in part because the COB development officer makes a point to bring them back to campus to speak). At the same banquet was Melissa Dyrdahl, whose tech career spanned HP, Claris and Adobe. Another bachelor’s alum who’s spoken at SJSU is Dave Wickersham, then COO of Seagate. Two other tech veteran speakers I’ve heard were MBA grad Larry Boucher and Amir Mashkoori (who has both undergrad and graduate degrees from us).

These and other alumni exemplify a career driven by (as one colleague put it) “the hunt for ‘what’s the next challenge’.” This is the path our top students will take, and our challenge is to figure out how to prepare them for this path.

In one of my more tactless moments today (in an academic career filled with tactless moments), I wondered how unionized tenured public employees can prepare themselves to capture this dynamism for students. We are the antithesis of what we want to convey. I fear that even the most enthusiastic and talented teacher (of which we have many) will eventually be worn down under the weight of bureaucracy and serving in the same job at the same rank with the same responsibilities for 20 or 30 years.

Our dean, David Steele, spent 25 years in roles ranging from IT and finance to operations before becoming president of Chevron Latin America. I wish there was some way for university faculty to similarly be cross-trained on various disciplines so that we could prepare our students for similar careers.

5. Corporate Culture

The other thing about Silicon Valley that gradually came up was the corporate culture. It was (and is) not something found in all local companies, but it was/is found in the best ones. I argued that we should teach our OB intro class around running one of these companies, rather than the more generic model of corporation captured by the MBA textbooks.

This Silicon Valley culture treated its people as its greatest assets, and empowered them to do great things. In retrospect, it was associated with high-margin businesses supported by successful innovation-based differentiation strategies, and epitomized by what some consider Silicon Valley’s first startup: HP.

The engineering paradise of Bill & Dave may be gone for good. However, Cisco and Google still treat their full-time employees very well, as do other tech companies like IBM and Qualcomm.

Apple — founded explicitly to replicate the HP culture that Steve and Steve so admired — in the Jobs II era seems to have created a new lean production version of this culture. This may not make the “best places to work” list, but it does enable its employees to concentrate on making insanely great products (and capturing insanely great stock gains) rather than fighting stultifying bureaucracy.

Of course the key here is margins. DEC and Motorola and Nokia were all great places to work when the margins were good, but became miserable when they crashed due to the rise of strong competitors or substitutes.

So this goes back to a point I’ve been making to my best students for the last three or four years: do everything you can to work for a high-margin company. They treat their people better, the working conditions are better, the job is more fun and there will be more opportunity.

The future of Silicon Valley — and its global mindshare as a brand — depends on our ability to create more of these companies, and for the established firms to renew themselves and their product lines.